Board Diversity: The “Age Thing” – Does it Matter?

Research has been done around the world to determine how the diversity of a Board of Directors affects – and is affected by – revenue and profitability of a company. Research in Sweden, reported in Innovative Marketing, (Pesämaa, Klaesson, Haahti - Volume 4, Issue 4, 2008), anticipated a positive relationship between board members’ average age and corporate sales. Their conclusion? “… we expected first that average age as a measurement of diversity would have an effect on performance, which was not true in our case.”

Russell Reynolds Associates, a global executive search firm, noted in recent research of the Aerospace and Defense Industries, “As a result, director qualifications and board compositions have emerged as focal points in the ongoing corporate governance dialogue. Increasingly, there is a greater need for board members with deep management experience and diverse perspectives in order to serve customers, execute a competitive strategy and bring value to shareholders in the global marketplace. Diversity of gender, race and, to a lesser extent, age is also significant in this evolving board composition mix.”

Is there is an actual correlation between average age of board members and revenue and profitability in the Graphic Arts Industry? Does the diversity of the board – gender, age, and ethnicity – correlate to sales and profitability? Is the Graphic Arts Industry different from other industries? No one has actually done a detailed study. Regardless, we have compiled a series of data points for your consideration.

When addressing age as an element of diversity, there are many facets to consider. While one may believe that older board members bring more experience to the table and younger members bring more energy and a new outlook; assumptions and generalities may not apply as noted in the research from Sweden referenced above.

A majority of the 33 companies we sampled have board members with an average age of 60 or higher. Bitstream is the sole company on our list that has an average age over 65. On the other end of the range, Vistaprint has the youngest board, with and average age just over 48.

Four companies in our analysis have a high percentage of board members 65 years old or older: Valassis: 66.7% Baldwin: 62.5% Ennis: 60.0% Bitstream: 60.0%

Five companies have fewer than 10% of their members over 65. Potlatch: 10.0% Deluxe: 10.0% IBM: 9.1% Standard Register: 0.0% Vistaprint: 0.0%

Age of Board Chair

Averaging the ages of the 34 board chairs and “leaders” results in an average age of 59 years. Ten companies have a Chairman of the Board aged 65 or older.

Does the span of years represented on a board have any significance? While there is no research providing insight, wide difference between the youngest and oldest board member could result in either diversity or divisiveness.

Four companies have boards whose youngest member is 30 years or more younger that the oldest member:

A Board of Directors that has a good mix of members with age, experience, and youthful perspectives balances the insight and experience that comes from older board members with longer tenure with the new ideas introduced by younger and perhaps less experienced directors.

“A diverse board of directors in terms of age, sex, race and other characteristics… may indeed benefit a company in providing a range of viewpoints and experiences,” note David Katz and Laura McIntosh, of Wachtell, Lipton, Rosen & Katz, New York, in their monograph, Corporate Governance Update: Board Composition and Director Qualification Policies.

Notes:

Information for this report was been taken from SEC filings and report information filed in 2008 for the year 2007.

We have included public companies that file reports with the Securities and Exchange Committee (SEC) or other foreign exchanges; most are listed on the U.S. markets, NYSE or NASDAQ.

Financials for some companies are reported in Japanese yen or euros. While the currency is different, the ratios are still valid. Computed revenue and loss totals for these companies have been converted to US dollars at the exchange rate listed for February 25, 2009.

The fiscal year end varies from company to company. For example, some are in April, some in June, and most at the end of December.

If the financial reports were modified for any reason after the annual report was filed, it is possible those modifications were not made to the historical data.

We make no indication of changes such as acquisitions or divestitures that might provide insight into revenue increases or decreases.

There is no reference to unusual and one-time charges that might affect reported income or loss.

Sources of historical financial documents: Yahoo Finance, Google Finance, and 10KWizard, all of which compile data from publicly available records filed with the Securities and Exchange Commission, and public reports available from the various companies who report on foreign exchanges.